Milton Ezrati shares the basics of successful investing – one bite-sized piece at a time

When You Read the Financial Pages

Many readers have asked me about sources of information — newspapers, TV, radio, and web newsletters, to name some. These can offer the investor invaluable guidance. They all enable you to keep up with events as well as the buzz in the investment community. When reading, watching, or listening you should keep four questions in mind:

Does this information affect my holdings?

How does it affect them?

Does the information require action on my part?

If so, what action?

You should aim to stay current with the media every day and from as many sources as you can without driving yourself crazy or detracting from your other important obligations.

Some sources are better than others. Here are ten especially popular sources with my comments on each:

The Wall Street Journal (wsj.com) appears daily except Sunday, in print and on-line. It offers excellent U.S. coverage, but its international news is less complete than a global investor would want. The Journal’s writers do a good job of separating news from editorial, and the editorial pages frequently do a fine job of analyzing the news and government as well as corporate policy, but always remember to allow for the paper’s pro-business bias.

The Financial Times (ft.com) appears daily except Sunday, in print and on-line. It offers excellent news coverage, though it sacrifices depth on its U.S. reporting for superb global scope. The FT has a more liberal editorial bias (in the American sense) than the Journal and offers some fine analysis. It does a good job of separating news from editorial.

The New York Times (nytimes.com) appears daily, seven days a week, in print and on-line. It once rivaled the Journal for U.S. business, economic, and financial coverage but in recent years has slipped in this regard. The Times makes less effort than either the Journal or the FT to separate news from its editorial bias, which is most definitely liberal.

Reuters (reuters.com) and Yahoo Finance (www.finance.yahoo.com) update their content continually on the web and are picked up by many other media outlets. These sources offer thorough, unbiased, and succinct reporting on all developments, domestic and foreign, but provide no analysis.

Barron’s (barrons.com) appears weekly, in print and on-line. It offers a cursory review of the prior week’s developments, mostly in the U.S., and also highly useful, in-depth analyses of specific subjects of financial interest.

The Economist (economist.com) appears weekly, in print and on-line. It offers a comprehensive look at global economic, business, and financial developments, including the U.S. It also does a good job of analyzing economic policies and their underlying causes. It editorial bias is strongly free-market.

Bloomberg (bloomberg.com) updates continually on the web. It offers good news coverage and a lot of analytical and explanatory material. Its many contributing writers have varied editorial prejudices.

Investopedia (investopedia.com) updates continually on the web. It offers thorough explanations of investment questions as well as analyses of economic and business developments. It has a North American bias but also offers considerable global coverage. Like Bloomberg, its many contributing writers have various editorial biases.

Forbes (forbes.com) appears weekly in print and updates continually on-line. It, like Barron’s, offers a concise review of the previous week’s news and in-depth financial as well as business articles, especially but not exclusively focused on the U.S. Its strongly free-market editorial bias is evident throughout.

Broadcasts, whether on television, the web, or radio, can help keep you keep up with the news, but because this is a fast-moving medium, they frequently fail to offer the depth necessary to make even simple investment decisions.

A Warning and Some Further Guidance

Even with the highest quality news sources, the media tends to exaggerate the importance of whatever is happening at the moment, frequently at the expense of useful perspective. Why? Because all writers want you to read their articles, so they make their subject appear urgent and pivotal. Also, media are in the business of selling advertising, and by making their subject seem urgent, they keep you reading, ensuring that your eyes are exposed to as many ads as possible.

Here is an illustrative example. Once a month the Department of Commerce reports on the construction of new housing units. For a number of reasons, these monthly numbers are extremely volatile. An investor with related holdings might try to discern trends by averaging out the pattern of growth or decline over several months and take each particular month’s leaps and dives as just one piece of the picture. But journalists have little interest in presenting the latest information in this way. They generally, want to create drama, even if it contributes little to overall understanding.

The investor must then peel away a good deal before safely extracting usable investment insight from an article or broadcast. This might involve five steps:

Distinguish between the journalist’s tendency to sensationalize and any real-world significance of a particular news item.

Be aware of editorial bias that might slant how the news is reported.

After you have allowed for bias, use what remains to think about how much of the news was expected and therefore already built into asset prices.

If the news contains nothing surprising, then no action is required. If it contains a significant surprise, you must judge its likely impact on prices.

From that you must determine whether it warrants a buy, sell, or hold decision.

You can now see that hours of following financial news does not often require an immediate phone call to your broker, although you may learn enough to keep your eye on a developing trend.